On April 27, the DOJ announced that it reached a settlement that will require Baker Hughes Inc. and BJ Services Company to divest two specially equipped vessels and other assets in order to proceed with their proposed merger.
According to the complaint, the transaction as originally proposed would combine two of only four companies that provide specialized pumping services, called stimulation services, necessary for the production of oil and gas from wells in the U.S. Gulf of Mexico.
Stimulation services prevent sand from interfering with the flow of oil and gas from wells in the Gulf. These critical services are performed using specially designed and equipped vessels that are operated by experienced crews and supported by scientists, engineers and other lab technicians who customize the stimulation job for the specific well formation.
The complaint alleges that, as a result of the transaction, customers that viewed Baker Hughes and BJ Services as their first and second choices, based on reputation and service quality would lose their next-best alternative. This would give the merged firm the incentive and ability to raise its prices and lead the two other competitors in the Gulf to bid less aggressively. The transaction also would present the merged firm with the opportunity to move a vessel out of the Gulf, reducing the number of stimulation vessels available and likely increasing prices.
The proposed settlement requires the companies to divest two vessels used for providing stimulation services-BJ’s Blue Ray and Baker Hughes’ HR Hughes-along with certain other assets, including a dock facility in Port Fourchon, La., sand control tool assets and stimulation fluid assets. The proposed settlement also provides the purchaser of the divestiture package with an expansive right to hire personnel from both Baker Hughes and BJ Services.